28 February 2012
Ormonde Mining plc
("Ormonde" or "the Company")
Definitive Feasibility Study Delivers Exceptional Economics for the
Barruecopardo Tungsten Project
The Board of Ormonde is very pleased to announce the results of the Definitive Feasibility Study ("the Feasibility Study") on its 100% owned Barruecopardo Tungsten Project in Salamanca, Western Spain.
The Feasibility Study, based upon an averaged 227,000 metric tonne units ("mtu") of tungsten trioxide (WO3) production per year, has confirmed both the technical viability and very strong economics of this major tungsten project at a prudent base case tungsten APT(1) price of US$350/mtu, well below the current APT price of US$437/mtu. The Company now plans to advance the development of the Barruecopardo Tungsten Project as a major new European secure supply source of this critical commodity.
KEY OUTCOMES:
? JORC-compliant global Mineral Resource Estimate of 27.4Mt grading 0.26% WO3 for a total of 7.1 million mtus of WO3, with 4.1 million mtus classified as Measured and Indicated Resources
? Mining based on an optimised open pit shell containing Measured and Indicated Resources of 8.71Mt grading 0.32%WO3. This converts to a mining reserve of 8.69Mt grading 0.30% WO3 for a total of 2.61 million mtus of WO3
? Open pit mining presently scheduled over nine years (maximum annual mine production of 1.1 million tonnes per annum (Mtpa)) to produce an averaged 227,000 mtus per annum
? Average annual pre-tax net operating cash flows of ?29M at an APT price of US$350/mtu (current European APT price = US$437/mtu having traded in range of US$435-465/mtu over the past six months)
? Pre-tax NPV (8% discount rate) of ?120M and an IRR of 52.0% at an APT price of US$350/mtu
? Low cost project with a capital cost of ?48.5M and cash operating costs over the life of the open pit mine of ?99/mtu (=US$129/mtu at the feasibility exchange rate of $1.30 to Euro)
? Capital payback period of approximately 2 years at an APT price of US$350/mtu
? Plant commissioning to commence in Q3 2013 to become a major European tungsten mining company.
Kerr Anderson, Ormonde's Managing Director, said:
"The results of the independent Feasibility Study confirm both the technical viability and exceptional economics of this major tungsten project. We now move towards the development of the Barruecopardo Tungsten Mine as a low cost, strategic tungsten asset, transforming Ormonde into a major European tungsten mining company. The study provides the important detail required for due diligence as we seek to secure the most appropriate capital funding for the project. We will update shareholders as developments on this front progress."
PROJECT ECONOMICS
|
|
Tungsten APT Price |
|
|
US$250 |
US$350
Base Case
|
US$450 |
|
Euro/US$ |
1.30 |
1.30 |
1.30 |
|
Pre-tax ungeared NPV (8% discount rate) |
?28M |
?120M |
?212M |
|
Pre-tax IRR |
19.9% |
52.0% |
80.3% |
|
Average annual pre-tax net operating cash flow |
?13M |
?29M |
?45M |
|
Pre-tax net operating cash flows over life of open pit |
?120M |
?261M |
?403M |
|
Capital Payback Period (Years) |
3.9 |
2.0 |
1.5 |
The current European APT price is US$437/mtu.
Taxation, tax allowances and any available grants have not been included in the above financials.
CAPITAL COSTS
The capital cost for the proposed 1.1Mtpa operation is broken down as follows:
|
ITEM |
COST (Euro M) |
|
Mining |
3.9 |
|
Process Plant, associated Infrastructure and EPCM |
26.8 |
|
Water Management System |
8.2 |
|
Owners Costs |
5.2 |
|
Contingency |
4.4 |
|
TOTAL |
48.5 |
OPERATING COSTS
Life of mine cash operating costs are ?23.31/tonne of ore processed, broken down as follows.
|
ITEM |
Euro/tonne |
|
Mining (ore) |
4.07 |
|
Mining (waste) |
14.47 |
|
Processing |
3.50 |
|
General & Administration |
1.27 |
|
TOTAL COST |
23.31 |
Note: Stripping ratio of waste to ore = 6.3:1 and ore mining costs include grade control and re-handling costs
Over the life of the open pit operation these costs equate to ?99 per mtu processed (=US$129/mtu at the feasibility exchange rate of 1.30).
FEASIBILITY STUDY PROCEDURE
This Feasibility Study has been compiled with inputs from several international consulting engineering groups and contractors as set out in the table below.
|
Component |
Responsible Consultant |
|
Mineral Resources |
CSA Global Ltd (CSA) |
|
Open Pit Optimisation & Mining Reserves |
CSA Global Ltd (CSA) |
|
Metallurgical Testwork |
Wardell Armstrong International (WAI) |
|
Process Plant Design & Supporting Infrastructure |
Jacobs |
|
Water Management |
ATC Williams Pty Ltd (ATC) |
|
Environmental & Social |
International Mining Consultants (IMC) |
|
Overall Project Management |
TJ Metallurgical Services (TJ Met) |
|
Financial Model |
Ormonde Mining PLC (Ormonde) |
MINERAL RESOURCES
The Mineral Resource Estimate has been prepared by CSA Global and is reported according to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code 2004 edition). The Mineral Resource Estimate includes all mineral resources at Barruecopardo, both within and outside of the optimised open pit shell.
As disclosed in the new Mineral Resource announcement by the Company on 13 December, 2011, CSA has classified the Mineral Resources in the Measured, Indicated and Inferred categories as follows:
|
Classification |
Tonnes (million) |
Grade (WO3%) |
Contained mtus (WO3) |
|
Measured |
5.47 |
0.34 |
1.86 million |
|
Indicated |
12.33 |
0.26 |
3.20 million |
|
Inferred |
9.59 |
0.23 |
2.20 million |
|
GLOBAL |
27.39 |
0.26 |
7.12 million |
A total of 77 holes totaling 15,241 metres of drilling have been used in the resource estimation. Grade compositing, used to define the mineralised volume, has been carried out using a minimum horizontal width of 4 metres at a minimum grade of >=0.06% WO3, allowing for internal dilution. This process defined areas of mineralisation that constitute potentially mineable widths at an economic grade. These resources are effectively diluted to mineable grade by this estimation procedure.
MINING & ORE RESERVES
Open pit optimisation on the mineral resource utilising a tungsten APT price of US$275/mtu was carried out leading to the preparation of a practical open pit mine design based upon the optimum shell and subsequent development of a life-of-mine (LoM) plan. The resulting mine design is for an open pit some 1,100 metres long, 390 metres wide and 185 metres deep.
The mineral resources captured within the open pit are as follows:
|
Classification |
Tonnes (million) |
Grade (WO3%) |
Contained mtus (WO3) |
|
Measured |
4.97 |
0.35 |
1.72 million |
|
Indicated |
3.74 |
0.28 |
1.03 million |
|
Inferred |
0.82 |
0.22 |
0.18 million |
From the Measured and Indicated Resources, a Proven and Probable Mining Reserve has been defined (allowing for 5% losses and 5% dilution) totalling 8.69Mt, grading 0.30% WO3, broken down as follows:
|
Classification |
Tonnes (million) |
Grade (WO3%) |
Contained mtus (WO3) |
|
Proven |
4.96 |
0.33 |
1.64 million |
|
Probable |
3.73 |
0.26 |
0.98 million |
|
TOTAL |
8.69 |
0.30 |
2.61 million |
These reserves have been scheduled over a nine year mine life and the averaged stripping ratio of waste to ore from the open pit is 6.3:1. This gives a total of 63.1M tonnes of material (ore and waste) to be extracted from the open pit.
In addition to these mining reserves, the open pit design contains a further 0.82Mt of Inferred Resources at a grade of 0.22% WO3, totalling 184,000 mtus of WO3. Some or all of this Inferred Resource may convert to feed for the process plant during the course of mine production.
Mining will be carried out by conventional open pit methods using local contractors, adopting traditional "drill and blast" mining with shovel and truck operations. The new pit will comprise extensions to the historic main pit excavation to the north and south and at depth. Full mine production of 1.1Mtpa will be achieved following a one year ramp up period (0.7Mt in Year-1).
It is planned that mineral resources below the open pit will be further evaluated for subsequent exploitation by underground mining, with underground development planned to commence in the latter years of the open pit operation. The Feasibility Study has only considered the mining of the open pittable resource.
METALLURGICAL TESTWORK
Metallurgical testwork has been carried out in several stages by WAI using composited drill core intercepts. This showed that crushing of feed to 5mm was sufficient to achieve effective liberation of the tungsten minerals for gravity pre-concentration. Further testwork on the pre-concentrate showed that upgrading by gravity, followed by flotation to remove any sulphides, produced a final tungsten concentrate assaying 74.6% WO3 (industry standard = 65%) with an open-circuit tungsten recovery of 71.8%. Analysis of the results indicates that a process plant recovery of at least 78% can be expected when treating a plant feed of 0.30% WO3. Tungsten recovery will in practice vary depending on the concentrate specification and pricing as required by different offtakers.
All other testwork and environmental characterisation tests necessary for the Feasibility Study have been completed..
The Feasibility Study has recommended that confirmatory testwork be completed on details of the crushing and de-watering circuits (to finalise equipment sizing and configuration) and on possible refinements to the concentrate circuit.
PROCESSING PLANT
The design of the gravity processing plant and associated infrastructure has been undertaken by a subsidiary of Jacobs Engineering Group Inc. based upon the results of WAI's metallurgical testwork programmes and a"trade-off study" which assessed the economics of various process plant capacities. The final process plant design allows for a throughput of 1.1 million tonnes per annum ("Mtpa") operating five days per week, to produce an averaged 227,000 mtus of WO3 per annum over the nine year life of the open pit.
The gravity processing plant comprises three main components or stages:
1) A four-stage 1.1 Mtpa crushing circuit to yield a 5mm crush size which WAI determined will achieve liberation of the tungsten mineral (scheelite) - as such no grinding circuit is required
2) Screening of the crushed product at 1mm ahead of a gravity pre-concentration circuit consisting of jigs and spirals which treat the -5 to +1mm and -1mm size fractions, respectively, to produce a nominal 8,400 tonnes per annum of pre-concentrate
3) A very small clean-up and tabling circuit, principally to remove the sulphides
Stages 1 and 2 in the processing are predicted to result in some 99% of the initial feed to the plant being discarded prior to Stage 3 and stored as a dry stockpile with the mixed waste rock, with no tailings dam required.
It should be noted that this proposed processing circuit is essentially very similar to that which was employed at the old Barruecopardo mining operation in the 1960 to 1980s. At that time, the Barruecopardo Mine sold a premium tungsten concentrate to European offtakers.
WATER MANAGEMENT
The water management system designed by ATC involves a Main Water Dam with a capacity of 760 million litres and smaller collection dams, which will be progressively constructed during the early years of mine production. The historical pit excavation will be de-watered by pumping to a Water Treatment Plant. Treatment costs will be minimal as metal concentrations in this water are very low. Calculations show that given the treatment and re-use of water contained in the existing excavations, project water demand and supply can be balanced over the life of the open pit.
INFRASTRUCTURE
Having previously operated as a mine, the project benefits from significant infrastructure already being in place, including roads and power lines close to the site. Upgrades to several of these will be required and have been included in the capital costs.
Access to provincial, regional and International infrastructure is excellent, with good road and rail links to mainland Europe and various ports on the northern coast for overseas shipments.
ENVIRONMENTAL, SOCIAL, PERMITTING & COMMUNITY
Environmental Baseline reports include: fauna, vegetation, archaeology, climate, socio-economic and site clean-up. The Feasibility Study also includes a detailed closure and restoration plan.
Initial permitting documentation was submitted to the Provincial Government on 11 January 2011. Following responses from and liaison with the Administration, the final Environmental Impact Assessment (conforming to the appropriate Spanish Laws) is expected to be presented within three months and this initiates the final stage of the permitting process.
The Barruecopardo project is located in an area and community which has a history of tungsten mining. Ormonde is committed to ensuring that the local community benefits from the re-commencement of mining at Barruecopardo by direct employment in the operation and indirectly through the use of local suppliers and services.
NEXT STEPS
Completion of the Feasibility Study positions the Company to move forward with various critical activities over the next six months.
Completion and submission of the final permitting documentation, including the final Environmental Impact Assessment, will occur within the next three months.
The Company will also now move to finalise its offtake and capital funding arrangements. The low capital costs and robust economics demonstrated in the Definitive Feasibility Study should promote a favourable outcome to these matters, with the Company focused on minimising any equity which may be required to further advance and bring the project to production.
Further engineering design work will be initiated during this period and an additional round of metallurgical testwork will be completed to provide samples of final concentrates to potential offtake parties.
(1) Ammonium paratungstate (APT) is the intermediate tungsten product which is most used for tungsten pricing, quoted in metric tonne units (mtu's) and published by Metal Bulletin. One mtu = 10 kgs.
Kerr Anderson PhD EurGeolPGeo, Managing Director of Ormonde Mining plc, and a qualified person as defined in the Guidance Note for Mining, Oil and Gas Companies, June 2009, of the London Stock Exchange, has reviewed and approved the technical information contained in this announcement.
A glossary explaining technical terms contained in this announcement can be found at www.ormondemining.com/en/investors/technical_glossary.
For more information please visit www.ormondemining.com or follow Ormonde on Twitter https://twitter.com/ormondemining or Linkedin http://www.linkedin.com/company/ormonde-mining-plc
Enquiries to:
Ormonde Mining plc
Kerr Anderson, Managing Director Tel: +353 (0) 1 8253570
Bankside Consultants
Simon Rothschild Tel: +44 (0)20 7367 8888 Mob: +44 (0)7703 167065
Murray Consultants
Ed Micheau Tel: +353 (0)1 4980300 Mob: +353 (0)86 803 7155
Davy (Nomad / ESM Adviser)
Eugen?e Mulhern / Roland French Tel: +353 (0)1 6796363
Fairfax I.S. PLC (Joint Broker)
Ewan Leggat / Katy Birkin Tel: +44 (0)207 598 5368
ENDS
About Ormonde
Ormonde Mining Plc is admitted to trading on the AIM market in London and the ESM market in
Dublin. Ormonde is a mineral development and exploration company focused on Spain (Ticker
ORM).
Ormonde's key activities include:
The Barruecopardo Tungsten Project - Ormonde is developing a low cost mining operation at Barruecopardo to produce ~12% of non-Chinese annual global mine production.
The La Zarza Copper Project - a large "massive sulphide" deposit with significant copper resources; exploration for an enlargement to the current copper resource is being funded through a joint venture with Antofagasta Minerals.
Gold Explorationin several highly prospective areas of western Spain.
Forward Looking Statements
Some of the statements contained in this release are forward-looking statements, such as estimates and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggestions herein. Except as required by applicable law or regulation, Ormonde does not intend to update any forward-looking statements to conform these statements to actual results.
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